UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM10-Q
(Mark One)
For the quarterly period ended March 31, 2025
OR
For the transition period from ___________ to ______________.
Commission File Number 1-32955
HOUSTON AMERICAN ENERGY CORP.
(Exact name of registrant as specified in its charter)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 par value per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No☒
As of May 9, 2025, we had 15,686,533 shares of $0.001 par value common stock outstanding.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
March 31,
2025
(Unaudited)
December 31,
2024
The accompanying notes are an integral part of these unaudited consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
—
(15,699
CONSOLIDATED STATEMENTS OF CASH FLOWS
(1,311,230
Notes to Consolidated Financial Statements
NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of Houston American Energy Corp., a Delaware corporation (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for a complete financial presentation. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited consolidated financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year.
These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes, which are included as part of the Company’s Form 10-K for the year ended December 31, 2024.
Consolidation
The accompanying consolidated financial statements include all accounts of the Company and its subsidiary (HAEC Louisiana E&P, Inc.). All significant inter-company balances and transactions have been eliminated in consolidation.
Segment Reporting
The Company’s chief operating decision maker (“CODM”), the Chief Executive Officer, manages the Company’s business activities as a single operating and reportable segment at the consolidated level. Accordingly, our CODM uses net income to measure profit or loss, allocate resources, and assess performance. Further, the CODM is regularly provided with and utilizes consolidated functional expenses, as presented in the accompanying consolidated statements of operations, and total assets at the consolidated level, as included in the consolidated balance sheets herein, to manage the Company’s operations.
Liquidity and Capital Requirements
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the issuance date of these consolidated financial statements. The Company has incurred continuing losses since 2011, with an accumulated deficit of $86.2 million as of March 31, 2025.
The Company believes that it has the ability to fund, from cash on hand, its operating costs and anticipated drilling operations for at least the next twelve months following the issuance of these financial statements.
The actual timing and number of wells drilled during 2025 and beyond will be principally controlled by the operators of the Company’s acreage, based on a number of factors, including but not limited to availability of financing, performance of existing wells on the subject acreage, energy prices and industry condition and outlook, costs of drilling and completion services and equipment and other factors beyond the Company’s control or that of its operators.
In the event that the Company pursues additional acreage acquisitions or expands its drilling plans, the Company may be required to secure additional funding beyond our resources on hand. While the Company may, among other efforts, seek additional funding from “at-the-market” sales of common stock, and private sales of equity and debt securities, it presently does not have any commitments to provide additional funding, and there can be no assurance that the Company can secure the necessary capital to fund its share of drilling, acquisition or other costs on acceptable terms or at all. If, for any reason, the Company is unable to fund its share of drilling and completion costs, it would forego participation in one or more of such wells. In such event, the Company may be subject to penalties or to the possible loss of some of its rights and interests in prospects with respect to which it fails to satisfy funding obligations and it may be required to curtail operations and forego opportunities.
Accounting Principles and Use of Estimates
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing financial statements, management makes informed judgments and estimates that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management reviews its estimates, including those related to such potential matters as litigation, environmental liabilities, income taxes and the related valuation allowance, determination of proved reserves of oil and gas and asset retirement obligations. Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk include cash, cash equivalents (if any) and any marketable securities (if any). The Company had cash deposits of $4,938,537 in excess of the FDIC’s current insured limit on interest bearing accounts of $250,000 as of March 31, 2025. The Company has not experienced any losses on its deposits of cash and cash equivalents.
Earnings (Loss) per Share
Basic earnings (loss) per share is computed by dividing net loss available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted in common shares that then shared in the earnings of the Company. In periods in which the Company reports a net loss, dilutive securities are excluded from the calculation of diluted net loss per share amounts as the effect would be anti-dilutive.
New Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU is effective for the annual period ending December 31, 2025. The Company has applied the ASU but concluded that no further disclosure is necessary given that the Company has significant loss carryforwards and therefore has not paid federal income tax.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 may be applied prospectively with the option for retrospective application for all prior periods presented. The Company is currently evaluating the impact of adopting this guidance on the Company’s current financial position, results of operations or financial statement disclosures.
Subsequent Events
The Company has evaluated all transactions from March 31, 2025 through the financial statement issuance date for subsequent event disclosure consideration. See Note 8.
NOTE 2 – REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue from Contracts with Customers
The following table disaggregates revenue by significant product type for the three-month periods ended March 31, 2025 and 2024:
SCHEDULE OF DISAGGREGATES REVENUE BY SIGNIFICANT PRODUCT
There were no significant contract liabilities or transaction price allocations to any remaining performance obligations as of March 31, 2025 or 2024.
NOTE 3 – OIL AND GAS PROPERTIES
During the three months ended March 31, 2025 and 2024, the Company recorded depletion expense of $21,885 and $34,978, respectively.
Geographical Information
The Company currently has properties in the United States. Revenues for the three months ended March 31, 2025 and long-lived assets (net of depletion, amortization, and impairments) as of March 31, 2024 are presented below:
SCHEDULE OF REVENUES AND LONG LIVED ASSETS ATTRIBUTABLE TO GEOGRAPHICAL AREA
NOTE 4 – STOCK-BASED COMPENSATION EXPENSE
In 2008, the Company adopted the Houston American Energy Corp. 2008 Equity Incentive Plan (the “2008 Plan”). The terms of the 2008 Plan, as amended in 2012 and 2013, allow for the issuance of up to 480,000 shares of the Company’s common stock pursuant to the grant of stock options and restricted stock.
In 2017, the Company adopted the Houston American Energy Corp. 2017 Equity Incentive Plan (the “2017 Plan”). The terms of the 2017 Plan, allow for the issuance of up to 400,000 shares of the Company’s common stock pursuant to the grant of stock options and restricted stock.
In 2021, the Company adopted the Houston American Energy 2021 Equity Incentive Plan (the “2021 Plan” and, together with the 2008 Plan and the 2017 Plan, the “Plans”). The terms of the 2021 Plan allow for the issuance of up to 500,000 shares of the Company’s common stock pursuant to the grant of stock options and restricted stock.
Persons eligible to participate in the Plans are key employees, consultants and directors of the Company.
The Company periodically grants options to employees, directors and consultants under the Plans and is required to make estimates of the fair value of the related instruments and recognize expense over the period benefited, usually the vesting period.
Stock Option Activity
In November 2024, the Company agreed to issue to its CEO a number of options equal to $15,000 divided by the closing price of our stock on the 15th day of each month. The strike price of each option is equal to the grant price. The options have a ten10-year life and are exercisable at $0.70 per share for the January, February, and March 2025 issuances, vest 20% on the date of grant and 80% ten months from the date of grant. The grant date fair value of these stock options was $13,604 in January 2025, $13,486 in February 2025, and $13,241 in March 2025, based on the Black-Scholes Option Pricing model based on the following assumptions: market value of common stock on grant dates – $1.63, $1.41, and $1.07, respectively; risk free interest rate based on the applicable US Treasury bill rate – 0%; dividend yield – 0%; volatility factor based on the trading history of the Company – 92%; weighted average expected life in years – 10; and expected forfeiture rate – 0%. The Company also issued 15,000 options to a board member as compensation. The options have a ten10-year life and are exercisable at $1.63 per share for the January issuance, vest 20% on the date of grant and 80% ten months from the date of grant. The grant date fair value of these stock options was $22,174 in January 2025, based on the Black-Scholes Option Pricing model based on the following assumptions: market value of common stock on grant dates – $1.63; risk free interest rate based on the applicable US Treasury bill rate – 0%; dividend yield – 0%; volatility factor based on the trading history of the Company – 92%; weighted average expected life in years – 10; and expected forfeiture rate –0%.
A summary of stock option activity and related information for the three months ended March 31, 2025 is presented below:
SCHEDULE OF STOCK OPTION ACTIVITY
During the three months ended March 31, 2025, the Company recognized $14,057 of stock-based compensation expense attributable to the amortization of stock options. As of March 31, 2025, there is $84,980 of unrecognized stock-based compensation expense related to non-vested stock options.
As of March 31, 2025, there were 24,969 shares of common stock available for issuance pursuant to future stock or option grants under the Plans.
Stock-Based Compensation Expense
The following table reflects total stock-based compensation recorded by the Company for the three months ended March 31, 2025 and 2024:
SCHEDULE OF STOCK-BASED COMPENSATION
Three Months Ended
NOTE 5 – CAPITAL STOCK
Common Stock
On January 22, 2025, the Company entered in a securities purchase agreement pursuant to which the Company sold 2,600,000 shares of the Company’s common stock at a purchase price of $1.70 per share in a registered direct offering. The Company received approximately $3.8 million in net proceeds.
Warrants
A summary of warrant activity and related information for 2025 is presented below:
SUMMARY OF WARRANT ACTIVITY
NOTE 6 – EARNINGS PER COMMON SHARE
Earnings (loss) per common share-basic is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Net income (loss) per common share-diluted assumes the conversion of all potentially dilutive securities and is calculated by dividing net (loss) income by the sum of the weighted average number of shares of common stock, as defined above, outstanding plus potentially dilutive securities. Net income per common share-diluted considers the impact of potentially dilutive securities. In periods in which there is a loss because the inclusion of the potential common shares, as defined above, would have an anti-dilutive effect.
The calculation of earnings (loss) per common share for the periods indicated below were as follows:
SCHEDULE OF EARNINGS (LOSS) PER COMMON SHARE
For the three months ended March 31, 2025 and 2024, the following warrants and options to purchase shares of common stock were excluded from the computation of diluted net income (loss) per common share, as the inclusion of such shares would be anti-dilutive:
SCHEDULE OF ANTI-DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF DILUTED NET INCOME LOSS
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Lease Commitment
The Company leases office facilities under an operating lease agreement that expires October 31, 2025. During the three months ended March 31, 2025, the operating cash outflows related to operating lease liabilities of $24,221 and the expense for the right of use asset for operating leases was $23,867. As of March 31, 2025, the Company’s operating lease had a weighted-average remaining term of 0.58 years and a weighted average discount rate of 12%. As of March 31, 2025, the lease agreement requires future payments as follows:
SCHEDULE OF FUTURE PAYMENTS UNDER LEASE AGREEMENT
Total base rental expense was $23,867 and $22,646 for the three months ended March 31, 2025 and 2024, respectively. The Company does not have any capital leases or other operating lease commitments.
NOTE 8 – SUBSEQUENT EVENTS
During the April 24, 2025 shareholder meeting, all matters put forward before the Company’s stockholders for consideration and approval, as set out in the Company’s definitive proxy statement dated April 11, 2025, were approved by the requisite number of votes cast at the meeting. This included the Company’s proposed acquisition of Abundia Global Impact Group (“AGIG”), a company specializing in converting waste into high-value fuels and chemicals. Under the related Share Exchange Agreement, the Company will issue a number of shares equal to 94% of the Company’s issued and outstanding stock, after taking into account the issuance to the AGIG Unitholders. This will result in the issuance of approximately 245,755,684 shares of the Company’s common stock upon closing of the transaction.
Forward-Looking Information
This Form 10-Q quarterly report of Houston American Energy Corp. (the “Company”) for the three months ended March 31, 2025, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that there are statements that are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement, where we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished.
The actual results or events may differ materially from those anticipated and as reflected in forward-looking statements included herein. Factors that may cause actual results or events to differ from those anticipated in the forward-looking statements included herein include the Risk Factors described in Item 1A herein and in our Form 10-K for the year ended December 31, 2024.
Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Form 10-Q to be accurate as of the date hereof. Changes may occur after that date, and we will not update that information except as required by law in the normal course of our public disclosure practices.
Additionally, the following discussion regarding our financial condition and results of operations should be read in conjunction with the financial statements and related notes contained in Item 1 of Part 1 of this Form 10-Q, as well as the Risk Factors in Item 1A and the financial statements in Item 7 of Part II of our Form 10-K for the fiscal year ended December 31, 2024.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We believe certain critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements. A description of our critical accounting policies is set forth in our Form 10-K for the year ended December 31, 2024. As of, and for the three months ended, March 31, 2025, there have been no material changes or updates to our critical accounting policies.
Recent Developments
Drilling and Operating Activity
During the three months ended March 31, 2025, the six wells on the Finkle State Lease in which the Company is participating were in the process of being completed on March 31, 2025. At March 31, 2025, we had 4 wells on production in the U.S. Permian Basin.
Results of Operations
Oil and Gas Revenues. Total oil and gas revenues decreased 31% to $102,345 in the three months ended March 31, 2025, compared to $147,686 in the three months ended March 31, 2024. The decrease in revenue was primarily due to one well being shut down for a month during the quarter.
The following table sets forth the gross and net producing wells, net oil and gas production volumes and average hydrocarbon sales prices for the quarters ended March 31, 2025 and 2024:
March 31,(1)
The change in production volumes was primarily attributable to the natural decline in production.
The change in average oil and natural gas sales price realized reflects global energy trends.
Oil and gas sales revenues are entirely attributable to our U.S. properties.
Lease Operating Expenses. Lease operating expenses decreased 47% to $76,025 during the three months ended March 31, 2025, from $163,030 during the three months ended March 31, 2024. The decrease was primarily attributable to one well being shut for a month and the reporting of only two months of production for the quarter.
Depreciation and Depletion Expense. Depreciation and depletion expense was $21,885 and $34,978 for the three months ended March 31, 2025 and 2024, respectively. The change in depreciation and depletion was principally due to one well being shut for a month, and production data for March being unavailable for accruals.
General and Administrative Expenses (excluding stock-based compensation). General and administrative expense increased to $1,052,361 during the three months ended March 31, 2025 from $307,140 during the three months ended March 31, 2024. The change in general and administrative expense was primarily attributable to professional fees related to the proposed acquisition of Abundia Global Impact Group, LLC (“AGIG”), which is anticipated to close during the second quarter of 2025. (See Note 8)
Stock-Based Compensation. Stock-based compensation decreased to $14,057 during the three months ended March 31, 2025 from $50,667 during the three months ended March 31, 2024. This decrease was largely due to a decline in the Company’s share price from March 31, 2024 to March 31, 2025.
Other Income (Expense). Other income/expense, net, totaled $29,500 of income during the three months ended March 31, 2025, compared to $392,430 of income during the three months ended March 31, 2024. Other income consisted of interest earned from bank balances. The decrease in other income was due to no income from Hupecol Meta in 2025.
Financial Condition
Liquidity and Capital Resources. At March 31, 2025, we had a cash balance of $5,308,416 and working capital of $5,755,969, compared to a cash balance of $4,059,182 and working capital of $3,917,231 at December 31, 2024. This increase was primarily due to the Company’s sale of 2,600,000 shares of common stock in January 2025.
Cash Flows. Operating activities used $1,311,230 of cash during the three months ended March 31, 2025, compared to cash provided of $122,770 during the three months ended March 31, 2024. The change in operating cash flow was attributable to an increase in prepaid expenses ($330,669), and professional fees related to the proposed acquisition of Abundia Global Impact Group, LLC (“AGIG”), which is anticipated to close during the second quarter of 2025.
Investing activities used $160,000 of cash during the three months ended March 31, 2005, compared to none during the three months ended March 31, 2024. The Company paid a $160,000 refundable deposit as part of the acquisition process for RPD Technologies.
Financing activities provided $3,819,495 during the three months ended March 31, 2025, compared to $901,500 provided during the three months ended March 31, 2024. Cash provided by financing activities during the three months ended March 31, 2024 was primarily attributable to funds received from the sale of common stock.
Long-Term Liabilities. At March 31, 2025, we had long-term liabilities of $62,470, compared to $114,685 at December 31, 2024. Long-term liabilities at March 31, 2025, consisted of a reserve for plugging costs.
Capital and Exploration Expenditures and Commitments.
In the event that we pursue additional acreage acquisitions or expand our drilling plans, we may be required to secure additional funding beyond our resources on hand. While we may, among other efforts, seek additional funding from “at-the-market” sales of common stock, and private sales of equity and debt securities, we presently have limited authorized shares of common stock available for issuance to support equity capital raises and we have no commitments to provide additional funding, and there can be no assurance that we can secure the necessary capital to fund our share of drilling, acquisition or other costs on acceptable terms or at all. If, for any reason, we are unable to fund our share of drilling and completion costs and fail to satisfy commitments relative to our interest in our acreage, we may be subject to penalties or to the possible loss of some of our rights and interests in prospects with respect to which we fail to satisfy funding commitments and we may be required to curtail operations and forego opportunities.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements or guarantees of third-party obligations at March 31, 2025.
Commodity Price Risk
The price we receive for our oil and gas production heavily influences our revenue, profitability, access to capital and future rate of growth. Crude oil and natural gas are commodities and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the markets for oil and gas have been volatile, and these markets will likely continue to be volatile in the future. The price we receive for production depends on numerous factors beyond our control.
We have not historically entered into any hedges or other transactions designed to manage, or limit, exposure to oil and gas price volatility.
Evaluation of Disclosure Controls and Procedures
Under the supervision and the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation as of March 31, 2025 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation under the COSO Framework, management concluded that our internal control over financial reporting was not effective as of December 31, 2024. Such conclusion reflects our chief executive officer’s assumption of duties of the principal financial officer and the resulting lack of an appropriate level of accounting knowledge and experience commensurate with the financial reporting requirements for a public company, in particular with respect to technical accounting knowledge regarding accounting for certain transactions, including reserve inputs, asset retirement obligations, calculation of depreciation, depletion, and amortization, and the full cost ceiling test, and a related lack of segregation of duties. Until we are able to remedy these material weaknesses, we are relying on third party consultants to assist.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized.
/s/ Peter F. Longo